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Factor pricing of cryptocurrencies

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  • Wang, Qiyu
  • Chong, Terence Tai-Leung

Abstract

In this paper, we study the cryptocurrency pricing factors. We review the literatures which state that the cryptocurrency market is weakly efficient. We use the Fama–MacBeth method to investigate the pricing factors. The classical equity-based risk factors including size, momentum, and value to growth from the Fama–French three factor model are studied. We use crypto-unique coin-to-token as a proxy for value-to-growth. For volatility risk factor category, we investigate realized volatility, skewness and jump. We also investigate liquidity factors including bid–ask, volume growth and Roll’s measure. The macro factors are found not to be an explanatory factor. The attention factor works sometimes. The factor model constructed by the significant factors explain most of the excess return of cryptocurrencies.

Suggested Citation

  • Wang, Qiyu & Chong, Terence Tai-Leung, 2021. "Factor pricing of cryptocurrencies," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940820302308
    DOI: 10.1016/j.najef.2020.101348
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    References listed on IDEAS

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    More about this item

    Keywords

    Pricing factors; Cross-section; Cryptocurrency; Fama–MacBeth method; Robustness test;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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